E JJOURNAL OF FINANCE. VOL. LI. NO 5. DECEMBER 1996 The caPm is Wanted Dead or Alive EUGENE F FAMA and Kenneth R. French shanken, and Sloan(1995)claim that &s from annual returns produce positive relation between B and average return than Bs from monthl They also contend that the relation between average return and book-to- market equity(BE/ME)is seriously exaggerated by survivor bias. We argue that urvivor bias does not explain the relation between BE/mE and average return. We also show that annual and monthly Bs produce the same inferences about the B premium. Our main point on the B premium is, however, more basic. It cannot the Capital asset pricing model(CAPM), given the evidence that B alone cannot FAMA AND FRENCH(FF 1992)PRODUCE two negative conclusions about the em- pirical adequacy of the capital asset pricing model(CAPM)of Sharpe(1964) and Lintner(1965): (i)when one allows for variation in CAPM market Bs that is unrelated to size. the ur te relation between B and turn fo 1941-1990 is weak; (ii)B does not suffice to explain average return. Size (market capitalization)captures differences in average stock returns for 1941- 1990 that are missed by B For the post-1962 period where we have book equity data, Be/mE (the ratio of book to market equity) and other variables also help explain average return Kothari, Shanken, and Sloan(KSS 1995) have two main quarrels with these conclusions. First, they claim that using Bs estimated from annual rather than monthly returns produces a stronger positive relation between average return and B. Second, KSS contend that the relation between average return and BE/ME observed by Ff and others is seriously exaggerated by survivor bias in the COMPUStat sample We argue( Section Ii) that survivor bias does not explain the relation be tween BE/mE and average return. We also show(Section III)that annual and monthly Bs produce the same inferences about the presence of a B premium in expected returns. But our main point on the B premium( Section I)is more basic: It cannot save the CaPm, given the evidence that B alone cannot explain expected return I. The Logic of Tests of the CAPM As emphasized by Fama(1976), Roll (1977), and others, the main implication of the CaPM is that in a market equilibrium, the value- weight market port- s Graduate School of Business, University of Chicago(Fama), and Yale School of Management (French). We acknowledge the helpful comments of Josef Lakonishok, Rene Stulz, and a referee 1947